Goldman Sachs goosed Apple's stock on Wednesday by placing it on the investment banking firm's "Conviction Buy List." Analyst Simona Jankowski told Wall Street that Apple should be valued more as a services company, rather than a hardware company, and issued a 12-month target of US$163 per share.

Shares of $AAPL ended the day on Thursday at $118.78, a gain of $1.49 (+1.27 percent). That's up $5.09 (+4.4 percent) from the close of $113.69 per share on Tuesday.

The Conviction Buy List is comprised of companies that Goldman Sachs believes are undervalued by Wall Street. Apple is being placed on the list because the firm believes there is plenty of room for growth for Apple as it further monetizes its massive user base, even if hardware growth slows.

In general, Wall Street values services companies higher than hardware companies. Recurring revenues are seen much more favorably than profits from the sale of hardware—they make for smoother revenue trends and often sport higher margins. Analyst Simona Jankowski also cited Apple's iPhone 6s and iPhone 6s Plus installment plans as an example of Apple transitioning to a service company.

"We expect that over the next year," she wrote, "the focus will shift from unit growth (which is slowing given a maturing smartphone market) to installed base monetization and recurring revenues ('Apple-as-a-Service'). Apple’s model has already tilted that way with its new iPhone 6s installment plans, and we see the upcoming TV service as a powerful next step."

According to the math Ms. Jankowski put together, Apple currently has a monthly average revenue per user (ARPU) of $42. She believes that as Apple adds services, including Apple Music, a rumored TV streaming service, and possible payment service, that the company could increase that ARPU to $153 in the U.S. and $50 for the rest of the world. If Apple did so by 2017, she argued, the company could see revenues of $533 billion in fiscal 2017.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.